Alcoa Takes Additional Cost Structure, Liquidity Actions (posted 3/20/09)
Alcoa recently announced a series of operational and financial actions to significantly improve its cost structure and liquidity. The operational actions will reduce costs by more than $2.4 billion annually, reduce capital expenditures an additional $1.0 billion in 2010, and improve working capital by $800 million in 2009. The company is reducing the quarterly common stock dividend from $0.17 to $0.03 per share, saving more than $400 million annually, and launching a public offering of common stock and convertible notes planned to yield proceeds of approximately $1.1 billion.
“By taking quick and decisive actions, Alcoa has been able to stay ahead of the evolving economic crisis,” said Klaus Kleinfeld, president and chief executive officer. “Today’s actions better prepare Alcoa to manage through a prolonged downturn and position the company for the future. We believe that we now have in place the strategic and operational fundamentals that will enable Alcoa to emerge even stronger when the economy recovers.”
Alcoa has launched a new series of operational measures to enhance its 2009-2010 performance and improve its cost structure. The targeted results of these operational measures are: by 2010, procurement efficiencies reducing costs by $2 billion annually and overhead rationalization, reducing costs by $400 million annually; in 2009, working capital efficiency initiatives yielding $800 million in cash improvements; and by the second half of 2009, a 50 % reduction of capital spending to a sustaining level of $850 million annually.
As previously announced, the company is exiting four mid- and downstream businesses, as well as the Shining Prospect special purpose vehicle that held shares in Rio Tinto with an expected yield of approximately $1.1 billion in cash in connection with these two actions. These initiatives, together with the dividend reduction and new financings, will further strengthen Alcoa’s balance sheet and enhance its liquidity.
Additional details are available at www.alcoa.com.